Press Release
VIS Credit Rating Company Maintains Entity Ratings of BIPL Securities Limited
Karachi, April 13, 2020: VIS Credit Rating Company Ltd. (VIS) has maintained the entity ratings of BIPL Securities Limited (BIPLS) at ‘A-/A-2’ (Single A Minus/A-Two). Outlook on the assigned ratings has been revised from ‘Negative’ to ‘Rating Watch-Developing’ in view of three separate, public announcements of intention, from AKD Securities Limited, JS Global Capital Limited and Next Capital Limited, respectively, to acquire 77.12% voting shares of BIPLS. The previous rating action was announced on February 19, 2019.
The ratings assigned to BIPLS reflect existing market position, sponsor profile, sizeable retail client base and adequate liquidity and capitalization indicators. Improving persistently high cost to income ratio vis-à-vis similar rated peers and existing limited diversification in revenue streams will be key rating drivers. Disruption in operations due to coronavirus outbreak and impact of the same on market volumes remains a key business risk factor.
Performance of Pakistani equity market has remained dismal over the past two fiscal years with dwindling trading volumes largely owing to economic slow-down, increasing interest rate environment and aggressive foreign selling. Given tough market conditions, players with efficient and variable cost structure along with diversified revenue streams managed to remain profitable. Going forward, focus of brokerage companies is expected to remain on cost rationalization, revenue diversification and focus on higher margin business. Nevertheless, brokerage sector outlook is expected to remain challenging; impact of recently revised brokerage commission structure for all security brokers and recent trend in market volumes on BIPLS’ profitability would be tracked by VIS.
Given the significant reliance on brokerage income (particularly retail brokerage), earning profile of the company remains largely dependent on market volumes. A sizeable retail client base is a competitive advantage for the company with the same remaining a key focus area. Marketing strategy has been revamped to grow active customer base. Translation of these initiatives into improved brokerage revenue is considered important. Rationalization in expense base has limited the drag on operating profitability; however, cost to income ratio continues to be on the higher side. Overall profitability depicted improvement on account of higher revenue and controlled expense base. Going forward, continuity of efficient cost management and translation of various initiatives to enhance and broaden revenues are important for improvement in profitability indicators.
For further information on this rating announcement, please contact Mr. Muhammad Ibad Desmukh (Ext: 205) or the undersigned (Ext: 306) at 021-35311861-71 or fax to 021-35311872-3.
Faryal Ahmad Faheem
Deputy CEO
Applicable rating criteria: Methodology - Securities Firms Rating (June 2017)